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What's In Store for Barrick Gold's Q3 Earnings This Halloween?

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Cost containment is still the main issue, says one analyst.

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Third quarter earnings reports are starting to filter in from the gold sector, with many shareholders likely hoping that the results bring better news than Q2's numbers.

Barrick Gold (NYSE:ABX) is set to release its Q3 results before market open on Thursday, and is expected to earn around $0.50 per share on revenues of $2.91 billion, says Donald Selkin, chief market strategist at National Securities.

Last quarter, Barrick reported a net loss of $8.56 billion, or $8.55 per share, reflecting $8.7 billion in after-tax impairment charges driven by declines in spot prices and its embattled Pascua-Lama project in South America. The miner also cut its quarterly dividend from $0.20 to $0.05 in the summer, while shareholders called for faster changes to the company's board. Barrick shares have fallen 43.5% so far this year.

"The main issue with [Barrick] once again is cost containment in light of lower gold prices, and also whether or not they can increase or cut production," Selkin tells Minyanville. "Their best hope for the latter is the Pascua-Lama gold mine in the Andes Mountains between Chile and Argentina," he explains. In Q2, Barrick said it expected to reduce capital spending at Pascua-Lama by $1.5 to $1.8 billion in 2013-2014.

Goldcorp (NYSE:GG) kicked off earnings season late last week, reporting adjusted net earnings in the quarter of $190 million, or $0.23 per share – beating analysts' expectations by $0.03 per share.

The miner's net earnings came in at $5 million or $0.01 per share, compared with $498 million or $0.61 per share in Q3 2012, while Goldcorp's Q3 revenues were $929 million. Last quarter, Goldcorp reported a net loss of $1.93 billion or $2.38 per share.

Although Goldcorp did beat its earnings estimate in Q3, one of its problems, says Selkin, is that it has a high forward price/earnings ratio of 18 relative to other types of mining companies that have forward ratios of 15.

"On the other hand, this is compensated to some extent because they have lower debt levels. The main question going forward for this company as for other gold miners is whether or not they can contain their costs in light of lower gold prices, and whether they can increase production," he says.

In a statement, Goldcorp President and CEO Chuck Jeannes said that the company's focus on "operational discipline and cost containment" delivered positive results.

"Most of our mines saw meaningful reductions in costs compared to the previous quarter, with particularly impressive improvement at some of our higher-cost operations such as Porcupine in Ontario, [Canada]" he said.

However, Jeannes also mentioned challenges for the miner's Cerro Negro project in Argentina, including permitting delays, an "unsustainable" foreign exchange rate, and provincial taxation uncertainty. "In response, we have suspended exploration and deferred certain development activities at Cerro Negro, and we are revising our guidance for first gold production and capital costs," he said.

Overall, the miner narrowed its guidance for 2013 to between 2.6 and 2.7 million ounces at an all-in sustaining cost of between $1,050 and $1,100 per ounce.

As for Yamana Gold (NYSE:AUY), the miner reported Q3 net earnings of $43.5 million, or $0.06 per share, after Tuesday's market close, which was down from net earnings of $60 million or $0.08 per share in the same quarter of 2012, partly as a result of lower commodity prices. Yamana's adjusted earnings were $69.5 million or $0.09 per share, compared with $177.6 million or $0.24 per share in Q3 2012.

Yamana's revenues were $456.7 million in the third quarter, compared with $611.8 million in Q3 2012.

Also on the schedule this week, Newmont Mining (NYSE:NEM) is set to release its earnings after the trading session ends on Thursday, but investors will have to wait until after market close on November 13 to see Kinross Gold's (NYSE:KGC) Q3 earnings report.

Twitter: @helenbnichols
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